Dear FutureMoneyTrends.com Member,
People younger than 35 are not saving money, according to Moody’s Analytics. It’s bad… the savings rate for the Millennials (18-35) is negative 2%! This means that as a group they are spending more money than they have, financing their lifestyles and borrowing from their own futures.
This probably doesn’t surprise anyone reading this. The fact is the U.S. economy is suffering through a real economic depression, as noted in many of our videos and research reports.
For ages 35 to 44, the savings rate is positive — but just barely — hovering at 3%. As a nation, our savings rate is 5.6%, compared to more than double that in 1978 and a savings rate of around 10% all throughout the 1980s.
I suspect this national number is being brought up by the baby boomers, who really weren’t that great at saving, but are now trying to play catch up as they enter their retirement years. Looking at the 1990s to 2005, when the baby boomers were peaking in their spending habits, the savings rate of the U.S. collapsed from over 7% to 1.9%.
Today, the Millennials are not only entering the workforce in an economic depression, but they are entering with $1.2 trillion in student loans. Their upward mobility is facing a major headwind, since the depression has forced tens of millions of baby boomers to stay in the workforce, limiting the available positions for the generations behind them.
Here is where it gets scary: according to a Wells Fargo survey, Millennials pay out 47% of their paychecks to service their debts! This is a national tragedy. The government, with 3-decade mortgages and college loans to all (no payment while in school) has ballooned tuition and housing to unsustainable levels. 37% of U.S. households now have some form of student debt, with the median balance at $13,000.
Our younger generation is in debt, not saving, and they can’t find good jobs. Nearly half of all the jobs created in the past 5 years have been part-time work. And outside of Texas and North Dakota, there hasn’t been an inflation adjusted wage increase since the 1990s.
More Reasons to Save Then Ever
After reading the above, you can see why it’s more prudent than ever to save. America’s future really is uncertain. We’re a top-heavy nation with our demographics, and the era of entitlements and corporate welfare have set us all up for a real paradigm shift.
If this feels like a doom and gloom letter, it’s not. My hope is that it’s a wakeup call to anyone who isn’t saving 1/5 of their income. In normal times, a tenth would probably do, but right now, we strongly encourage you to save 20% of your income.
For many, this seems impossible, but in reality, a major cut in your housing and vehicle expenses is a good place to start if you want to trim your spending levels in order to increase your saving rate. For extreme ideas, I wrote an article earlier this year, “10 Ways to Really Save Money”.
Moving to a smaller home, further from a job, or out of a higher cost state can reduce many people’s expenses upwards of 50%. As far as your vehicle, payments are a mistake period… and if your car’s purchase price was 50% of your annual income, you’re an idiot.
With low interest rates here in the U.S. and the world in a currency war, saving and compounding your wealth isn’t as simple as it should be. In next week’s Weekly Wealth Digest, we will cover the safest saving strategies known to us.
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